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Speculators Of Properties Are Beginning To See Them As A Possible Financial Ruin

A report from CBC News in Canada. “According to the latest statistics from Canada Mortgage and Housing Corporation, the average monthly rent for a two-bedroom apartment in Regina was $1,130 in October 2018, compared to $1,116 in October 2017. This is mainly due to an abundance of newly constructed rental units that tend to charge more than older units. Newly constructed units have outpaced demand for rent, nudging Regina’s vacancy rate from 7 per cent to 7.7 per cent.”

“Shawn Schlechter, owner of Shawn’s Property Management, says he has never seen a vacancy rate this high in his 20 years in the business. He says he and other landlords are in the red for their properties right now. Some of his homes have been sitting vacant for six months. He says his main goal is to get tenants in the door. When a property owner tells him they need a $1,000 to cover their bottom line, he urges them to come down to $900 in order to stay competitive. ‘It’s just one of those things that you have to do. It’s better to lose $100 than it is to lose the whole $1,000,’ said Schlechter.”

From Mansion Global on the UK. “Investing in period property can be two thirds cheaper than buying a new-build in the most expensive parts of central London. You can lose out if you buy into a big scheme that will take a long time to complete, says Mark Parkinson of Middleton Advisors, a buying agency. Work has stopped at the Earls Court development in west London, where the site has lost more than half its value in four years after political disputes and a slump in property prices.”

From The Africa Report. “A classic construction boom has unfolded in the Sandton area of Johannesburg even as a worsening economic climate clouds the outlook for the city as a financial centre. The risk of hubris is clear as Sandton prepares to unveil The Leonardo, a 234-metre skyscraper, billed as Africa’s tallest building and scheduled to open later this year.”

“While there’s no prospect of the Leonardo becoming a white elephant, Craig Smith, head of research at Anchor Stockbrokers in Johannesburg says he’s ‘not convinced’ that the building will prove to be a good financial investment. ‘The residential market is under pressure and there is to our mind limited capital growth in the short to medium term given the weak economy and economic outlook,’ says Smith.”

“The outlook for South African real estate is cloudy at best. Growthpoint, South Africa’s largest listed property company, said that tenants are spoilt for choice and negotiations are tough. The group identified an oversupply of space across all property sectors in South Africa.”

“Bottom Line: The opening of Africa’s tallest building may come to be seen as calling the top of an unsustainable local property boom.”

The Times of India. “The number of property developers who have been dragged to the bankruptcy court has more than doubled in less than a year as a prolonged slump in sales and the ongoing liquidity crisis make things tough for many in the country. ‘Most developers who have been taken to court were running unsustainably. It was already a bad situation in the last 10 years where they were borrowing to pay the interest. The working capital requirement was funded by the lenders. With the NBFC crisis, the music has stopped,’ Pankaj Kapoor, founder of real estate research firm Liases Foras, said. Builders have been unable to complete projects in the absence of funds.”

The Malaysia Reserve. “House prices have plummeted as much as 40% from their peak in Iskandar Puteri and the lavishly marketed posh development is turning into an attractive hunting ground for bargain seekers, but a financial bane for speculators. The continuous glut and a very low demand from locals are turning many completed developments, especially high-rise condominium and apartment blocks, into an almost ghost town.”

“Overdevelopment, high prices and excessive focus on foreign buyers have caused many residential units in Iskandar Puteri, Johor, unoccupied. Speculators of the properties are beginning to see them as a possible financial ruin. VPC Realtors Bruce Lee said the rental market in Iskandar Puteri is not very encouraging as well. ‘Rental demand in the area is very soft due to a lack of population. Out of 100% of rentable area, demand is only 20%. That is why some owners are giving free rental for six months to one year to get tenants, hoping for the next one year, the population will increase and the rental will go back to the normal level,’ he said.”

The Online Citizen on Singapore. “In September this year, 276 out of 300 newly released apartment units at the centrally located Avenue South Residence were grabbed on the opening day of sales itself. Despite witnessing a positive demand for new housing projects in Singapore, the number of homeowners who default on their mortgages in the country is increasing over the years.”

“As more and more homeowners default on mortgages, it could result to a ‘slow death’ as it shows that they cannot handle their finances, said Colin Tan, director of research at Suntect Real Estate Consultants. ‘If you can pay the interest, you’re not in default. But these people can’t even service the interest. It’s a reflection that the economy is not so good that you’re seeing more and more defaults,’ he noted.”

The South China Morning Post. “Chinese developers have been losing their appetite for land in the Greater Bay Area as they find themselves short of funds amid weakening property sales and a government crackdown on debt, new figures show. ‘Developers are very cautious in land-purchasing, even in hotspot cities as many of them are under liquidity pressure and have found it harder and harder to access sources of credit as Beijing has sought to clamp down on high debt levels,’ said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution.”

From Domain News in Australia. “A half-finished renovation did not deter buyers on a sunny Saturday in South Melbourne, with a young investor shelling out $1.003 million for a home the selling agent described as in ‘wrack and ruin.’ Buxton Port Phillip director Rohan White did not know what caused the former owner to abandon the project.”

“‘Something’s gone wrong, and they’ve run out of money along the way,’ he guessed. ‘I’ve never had something in this state of disrepair. You get unrenovated, but this is unusable.'”

This Post Has 72 Comments
  1. ‘He says he and other landlords are in the red for their properties right now. Some of his homes have been sitting vacant for six months…When a property owner tells him they need a $1,000 to cover their bottom line, he urges them to come down to $900 in order to stay competitive. ‘It’s just one of those things that you have to do. It’s better to lose $100 than it is to lose the whole $1,000’

    That’s where you get with these bubbles. A perfectly profitable business turns into a money bleed.

    How can all these countries overbuild, yet we’re told there is a shortage?

    1. Sitting vacant for six months which means at $900 a month a loss of $5400. Of course, the problem with dropping from $1000 to $900 is everyone in the complex is going to want a rent reduction. Of course, now that rent reductions are occurring world wide, California is capping rent increases to 5 percent plus inflation. The Globalists really are one trick ponies. Now that asset inflation is reached it’s peak how do they create more demand? I would love to see the Queen of the one trick ponies run again and as I said in the previous thread then go to the glue factory.

    2. “That’s where you get with these bubbles. A perfectly profitable business turns into a money bleed.”

      Buffett: “When you combine ignorance and leverage, you get some pretty interesting results.”

      It takes ignorance and leverage. There is always an abundant supply of ignorance but there is not always an abundant supply of leverage.
      But when there is an abundant supply of leverage – an overabundant supply of leverage, as in gobs of money searching for a place to die – you get some very interesting results. Some of these very interesting results do not make sense in a rational world but do make sense in a irrational world dominated by ignorance, which is the type of world we are now inhabiting.

      This has not always been so and will not always be so but for now this is where we are, which means it is popcorn time.

      IMHO, FWIW.

  2. “Shawn Schlechter, owner of Shawn’s Property Management, says he has never seen a vacancy rate this high in his 20 years in the business. He says he and other landlords are in the red for their properties right now.

    Delightful. The sooner you greedy landlords have your buildings foreclosed on and auctioned off for something approximating true market value, the sooner rents can drop and shelter can get more affordable, while speculators get their heads handed to them.

    1. “When a property owner tells him they need a $1,000 to cover their bottom line, he urges them to come down to $900 in order to stay competitive. ‘It’s just one of those things that you have to do. It’s better to lose $100 than it is to lose the whole $1,000,’ said Schlechter.”

      What fun! Every day you wake up is an opportunity to lose money. Day after day after day you lose money, you bleed money. And there as no painless way to stop the bleeding. Day after day, tic tic tic.

      The day the loan papers were signed was a day of joy. But later on this joy turned go despair.

      But what of the lender? Did he, too, experience joy on that Day? Yes? So what became of his joy? Is he still experiencing it?

      (To find out the answer to this question you will probably need to go to the beach because the beach is most likely the place he is currently hanging out.)

      😁

      1. Always a joy to have an “investment” that costs you money, month after month…

        Hint. If it doesn’t cash flow after ALL expenses…it is not an investment.

        1. Okay, so I’m a little hazy on this whole RE investment thingy, but isn’t the basic idea to have POSITIVE return on investment?

          1. When that sweet equity is now $150k underwater, and the house is cash flow negative, guess what happens next?

  3. Over a year ago an owner tried to double the rent on a food store in town. (According to several business owners)
    They wanted to Raised it from $8000 per month to $16,000 per month.
    The chain food store balked and closed.
    Now the building sits empty with almost no chance of being rented for that amount.
    Losing $8,000 a month plus a cut of sales but still paying taxes and watching the store go into disrepute: Ain’t life grand when you are greedy!
    Personally I miss the store.

    1. I think a lot of commercial real estate has been bought up by yield seeking investment funds that are promising investors, who are desperate for income, unrealistic returns. Because of the way the funds are structured, they are better off leaving the spaces unoccupied with a higher apparent rent and taking the tax write off. This has been happening all over NYC for years. Stores closing because of rent increases and then the storefronts sit empty. Commercial leases are really long and investment funds are banking on being able to revalue the asset based on a higher rent. If they lock in at a lower rent for ten years, that can’t happen. I suspect the fact that the commercial paper markets are being bailed out by the Fed on a nightly basis takes out much of risk of lending to commercial funds and fuels this kind of speculations.

    2. Re crazy CRE rent increases, apparently this is going on everywhere.
      I was recently in a store in Adelaide, South Australia. And heard the owner telling another customer that the store moved from its original location because he was confronted with a 250% rent increase.

    3. “The chain food store balked and closed.”

      Unless they’re serving warm food the margins are too tight.

  4. REALTOR, I have so much money left after “throwing money away on rent” every month that I threw it all away on U.S. and municipal bond funds and certificates of deposit and savings.

      1. This has become a problem, where do you stash your cash? In savings accounts that pay 0% interest? Heck, even munis don’t pay all that much, at least the bank account is insured.

        1. In savings accounts

          Consider that a savings account is not cash. It’s money loaned to the bank. It’s no longer in your possession. Guaranteed to be given back though, at some point!

          If you’re not in debt you’re 90% ahead.

  5. I luv it when people who vote for socialists get smacked in the face with socialism.

    “A community hearing on Monday night over a planned homeless shelter in Glendale, Queens was drowned out by opponents of the shelter, who shouted down city officials and residents who attempted to defend the facility.

    “Move ‘em to Park Slope!” said another opponent, referencing de Blasio’s neighborhood.”

    https://gothamist.com/news/angry-queens-residents-shout-down-plans-for-homeless-shelter-i-hope-someone-burns-it-down

  6. “Bottom Line: The opening of Africa’s tallest building may come to be seen as calling the top of an unsustainable local property boom.”

    It’s a classic sign of an incipient real estate bust.

  7. “Something’s gone wrong, and they’ve run out of money along the way,” he guessed. “I’ve never had something in this state of disrepair. You get unrenovated, but this is unusable.”

    Unusable.

    “You couldn’t use either bathroom upstairs. I’ve never had that sort of level of wrack and ruin.”

    Wrack and ruin.

    “Three …”

    (suckers?)

    “… bidders participated in the auction. It began with an offer of $800,000, then reached the quoted price of $900,000 with one bid. It sold to engineer and DJ Joel Kuperholz, who plans to use the home as an investment once he completes the renovation.”

    Renovation. The description of the property suddenly jumps from one of unusable wrack and ruin to one subject to renovation.

    “[It’s my] first property. It was location, proximity, and opportunity,” he said.”

    Ah, a virgin. This helps explain it.

    “Mr Kuperholz wasn’t put off by the work needed to fix up the townhouse.”

    Virginity can be a terrible thing to waste.

    “‘For me, I saw it as a cosmetic sort of thing,’ he said. ‘It’s doable for me with my parents managing it as a construction project.

    “But we’ve just renovated, so I’ve got friends who are in construction and stuff.”

    😁

    1. Cosmetic? Parents? Friends in construction? Good lord, this guy couldn’t cut his teeth on, say, taking down some wallpaper?

  8. VPC Realtors Bruce Lee said the rental market in Iskandar Puteri is not very encouraging as well. ‘Rental demand in the area is very soft due to a lack of population. Out of 100% of rentable area, demand is only 20%. That is why some owners are giving free rental for six months to one year to get tenants, hoping for the next one year, the population will increase and the rental will go back to the normal level,’ he said.”

    You’re fooked Bruce Lee

      1. If the want to attract illegals, they need to offer unlimited free parking. That’s how complexes keep immigrants out. They know immigrants collect beaters. Start charging $100/mo for extra vehicles, and immigrants look elsewhere (like to Cold War SFH that fit 1 family/bedroom).

  9. Got Milk?

    “The indu$try has to control its balance of $upply and demand$.”

    Ag secretary Perdue: Dairy farms may have to get bigger to $urvive

    Patrick Marley, Milwaukee Journal Sentinel

    MADISON, Wis. – President Donald Trump’s agriculture secretary said Tuesday he believes dairy farms can stay in business, but they may have to get bigger to do so.

    “Now what we see, obviously, is economie$ of $cale having happened in America – big get bigger and small go out. … It’s very difficult on economies of scale with the capital needs and all the environmental regulations and everything else today to survive milking 40, 50, 60 or even 100 cows, and that’s what we’ve seen.”

    “What we’ve seen is the number of dairy farmers go out, but the dairy cows haven’t reduced that much. The dairy cows haven’t gone to slaughter. They’ve gone to someone else’s herd for the most part,” Perdue said. “That just increases the supply of milk, which makes the supply-demand balance even exacerbated in that way.”

    Grant County dairy farmer Jerry Volenec expressed frustration with Perdue’s comments.

    “What I heard today from the secretary of agriculture was there’s no place for me,” said Volenec, who spoke at a news conference organized by the state Democratic Party.

    Nearly 3,000 U.$. dairy farm$ folded in 2018, about a 6.5% decline, according to U.S. Department of Agriculture figures.

    Wisconsin lost nearly 700 – almost two a day – as even dairy farmers used to enduring hard times called it quits in the fourth year of a downturn in milk.

    Iffin’ ya can move cow$, why can’t ya do the $ame with $helter.$hack$? Just li$t them in $omeone else portfolio$!

    Ea$y pea$y lemon$ $queasy.

      1. “… yet PG&E Corp.’s power shutoff meant to keep its equipment from sparking blazes could persist into next week.”

        Revenge is a dish best served cold.

        😁

    1. One thing I don’t see anybody talking about yet is that SMUD (maybe a Sacramento socialist experiment?) seems to be much better run than PG&E is in the rest of the state. So at least for the unfortunate souls in El Dorado Hills it’s easy to drive across the border into Sacramento County and charge your Tesla quickly at the Folsom mall superchargers. No power outages there.

    2. You can’t store a charge for your Tesla

      Sure you can.

      20 mph winds! I guess that power company can’t afford to be blamed for starting any more fires.

    3. They’re just getting the unwashed masses conditioned for the new normal we’re all going to have to accept as part of the upcoming “green new deal”.

      1. This is going to become the new normal in California. Just like gasoline that costs 50% more than elsewhere.

        I’ve noticed that my employer has gone on a hiring spree in Broomfield (Denver) while the Santa Clara site isn’t.

        1. Interesting. I have noticed in California that my layoff detector needs to be re-calibrated. It seems like as soon as things turn down even just a little they start looking for people to trim in the satellite offices. Which was normal to me after ~20 years in Colorado. The layoffs only seem to come to California after they cut everywhere else to the bone.

          So that is interesting if they are hiring there first…I wonder if that signals a change to what I’ve noticed or is something different about hiring versus firing?

          1. As I work in a tech company in Santa Clara, I see hiring slow quite a bit. The last 4 hires from my team were in Utah (2), MD (1), and TX (1). We have a position open for Asia too. It’s too tough to hire in the Bay Area and with the IPO Unicorn BURST, things are about to get interesting. Grab some popcorn!

          2. The companies in my field have a lot of my kind of work going on in Shanghai and Penang, both places I would love to live. However they are looking for locals at local wages and the days of paying Americans an American wage to go over and do it seems to be over at the engineer level. Usually my resumes get ignored but if I know somebody there and ask them the conversation usually gets a little uncomfortable because they don’t want to admit that they won’t consider me even though I might be the best person in the world for the job and they desperately need someone like me to do it. Although lately with all the Hong Kong stuff I’m starting to wonder if maybe it isn’t all for the best. I’m polite, but I’ll give an honest answer if people ask me what I think.

    4. Also — wouldn’t you think that high winds would be a boon for renewable energy? Seems to me all of those windmill farms would just generate that much more.

      1. That’s the problem with “renewables” (how is wind ‘renewable’?). We’re too backwards to store it and the utilities are shutting down distribution so you can’t export it so what do you do? Feather the props.

        What will be interesting to see, if this “just shut-r-down” insanity continues, is what will happen when all those household solar systems backfeed into a disconnected branch of the grid. If enough juice is fed into a branch system will we see equipment causing fires? I suppose this could also happen with bodged-together household gen-sets. “Just stick the wires in the fuse box, Jose, so I can get my Dodgers game! No need for a transfer switch!”

        1. No need for a transfer switch!”

          That is pretty funny. But would your TV work if you didn’t disconnect from a dead grid?

        2. What will be interesting to see, if this “just shut-r-down” insanity continues

          Rolling blackouts and rationing. Run the A/C? Fuggedaboutit.

      2. It doesn’t matter how much wind blows on the turbines if the grid can’t handle the electron holes.

        One thing Trump deserves praise for — he signed an exec order to shore up the grid against EMPs. You didn’t get that under Obama. Anything that protects the grid is a good thing.

      1. I kind of hope that Tesla will invest in vehicle to grid technology because a good battery (besides a Powerwall) that could serve as a backup to your house would be useful to a lot of people.

        I suspect that these electricity blackouts are going to move some people to invest in home battery storage.

        1. It’s very easy to DIY. On board my boat I have a house bank of batteries that can meet my electrical needs for 48 hours. I’ll run the generator for a couple of hours to recharge them if I’m not plugged into shore power by then. An inexpensive inverter and a few ordinary batteries. A tiny fraction of the cost of a “powerwall”.

          I have the same setup at home since the RV is parked here. If our power went out, I’d put my refrigerated food in the RV and go about my business.

          The key to doing with less resources is to use less resources.

          1. It’s very easy to DIY. On board my boat I have a house bank of batteries that can meet my electrical needs for 48 hours.

            That’s cool Blue, I like it. When you say “ordinary batteries”, are you talking about lead-acid batteries?

          2. lead-acid batteries

            Yes. They’re more robust than engine starting batteries though to make it through many cycles of deep discharge. About $2 per amphour capacity. I find 500 AH adequate to run my lighting, electronics and freezer for a couple of days. The inverter/charger is about $500.

  10. “In the past two years, California has seen the two deadliest wildfires in state history.”

    Oh, my!

    “In May, state officials found that Pacific Gas & Electric equipment was responsible for sparking last year’s Camp Fire, which killed 86 people and devastated the town of Paradise.”

    Those bastards! They should take steps to make sure this never, ever happens again!

    Oh, it looks as if they did …

    “In an attempt to reduce wildfire risk due to anticipated heavy winds starting Wednesday, PG&E is shutting off power to nearly 800,000 California homes and businesses, including 278,000 in the Bay Area.”

    Stay tuned.

    😁

    Link …
    (PS: Imbedded in the link is a bit of humor)

    Pleasanton, CA Police make viral joke about PG&E power outage
    https://www.eastbaytimes.com/2019/10/09/a-bay-area-police-department-made-a-viral-joke-about-the-pge-shutdown-and-people-have-strong-opinions/

    1. Of those 800,000 Californians who just lost power, I bet no more than .01% had made even the most basic preparations for such a scenario.

      1. 800,000 customers. Residential customer = 1 house, but sometimes more than that live there so it could be in to the millions of actual people affected.

    1. “Matt Lauer is a ‘real journalist.’”

      A hands-on investigative journalist getting caught performing some genuine hands-on investigating journalism.

      It’s a tough job but somebody has to do it.

      1. It’s a tough job but somebody has to do it.

        This guy had more than enough money to easily support a gorgeous hawt-ash Ukrainian who could teach him some etiquette and the wonders of lubrication. Why do these celebrity types choose the public shaming?

          1. The twitter feeds out Matt as a serial cheater with a timeline. His was certainly not a lifestyle for a family raising children. I feel sorry for his former wife.

    2. Brian Williams has been resurrected. Probably old news cuz I don’t watch TV…but happened to see him pop up on the screen in a lobby. I’m surprised Jussie Smollett hasn’t been given a job at one of these “news” channels. They could be coanchors at MSNBC and interview Elizabeth Warren about her Cherokee roots. There’s a show I would watch.

  11. The REIC is proposing a tax break to “help millennials and support prices.”

    https://www.marketwatch.com/story/this-tax-break-for-first-time-home-buyers-could-keep-the-housing-market-afloat-2019-10-09?mod=mw_theo_homepage&mod=mw_theo_homepage

    Presumably the idea is that by propping off prices, the millennials would be no better or worse off as home buyers. The money from the tax break would go to older home sellers. And the millennials would pay back even more federal debt in the future. Because those with lots of needs think they don’t have it bad enough as it is.

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